Our healthcare boom hides a public-system deficit

Why in the News

The most revealing number in India’s healthcare record is government health expenditure at 1.43 per cent of GDP in 2022 to 2023, against the 2.5 per cent target set by the National Health Policy 2017. Almost every visible measure of healthcare has expanded, with medical colleges and seats multiplied, the footprint of the All India Institute of Medical Sciences (AIIMS) network widened, and Ayushman Bharat established as one of the world’s largest publicly funded health insurance programmes. The latest report of the Parliamentary Standing Committee on Health and Family Welfare finds a system still struggling with basic capacity, affordability and regulation. The tension is that expansion has been measured in inputs the state can count, while the outcome that decides the result, whether a family is less exposed when illness strikes, is set by financing the state has not provided.

What does government health expenditure as a share of GDP measure?

1. What the ratio counts: It measures spending on health by the Centre, the states and local bodies, set against the size of the economy, so it rises only when health spending grows faster than output does.
2. Why the share and not the amount: An absolute figure grows every year with prices and with the economy, so only the share shows whether health is gaining or losing ground against competing claims on public money.
3. The benchmark it is read against: The National Health Policy 2017 fixed 2.5 per cent of GDP as the target, and the distance between that and the actual figure is what the public system’s shortfall is measured by.

Why has expanding medical education not fixed the distribution of care?

1. The expansion is real: The number of medical colleges has risen to 818, and undergraduate medical seats have reached 1,28,875.
2. The problem was never the count of doctors: It was where they practise, who can afford them, and whether the system has the infrastructure to use them.
3. Specialists are missing where they are most needed: The Committee finds specialist shortages at rural community health centres of roughly 70 to 80 per cent.
4. Facilities without a building: There are 17,788 sub centres with no building of their own.
5. Education as a commercial sector: Medical education has itself become a major commercial sector, with private and public private partnership models playing an important role, and once medical seats become valuable commercial assets the integrity of the regulator becomes the live question.

What does the private sector’s share of care cost a patient?

1. Where care actually happens: Citing the National Sample Survey Office (NSSO) 80th round of 2025, more than 60 per cent of hospitalisations and around 70 per cent of outpatient care are serviced by the private sector.
2. The price difference: Average hospitalisation expenditure is approximately Rs 6,631 in government hospitals, against Rs 50,508 in private hospitals.
3. How the state imposes a cost without charging one: The state does not have to bill a patient to place the cost of private treatment on them, and only has to fail to provide a realistic public alternative.

Why does insurance leave both prices and the missing middle unaddressed?

1. What insurance has delivered: Ayushman Bharat has helped millions of families obtain hospital care they might otherwise have been unable to afford.
2. Insurance pays the bill without controlling the price: If treatment costs Rs 5 lakh and insurance pays that amount, the patient is protected from immediate financial ruin while the healthcare system has still consumed the same sum.
3. Someone eventually pays: If prices continue rising, the cost falls somewhere, on the government, the insurer, the employer or the patient.
4. The missing middle: More than 40 crore Indians remain outside comprehensive financial protection, being too well off for the scheme and too poor for private cover.
5. Out of pocket spending stays high: Such spending has fallen substantially and still accounted for 43.4 per cent of total health expenditure in 2022 to 2023.

What is private capital buying, and what should the test of it be?

1. Where the capital is going: Major transactions involving Manipal Health Enterprises, CARE Hospitals, KIMS, Rainbow Children’s Hospital and several diagnostic chains illustrate the growing appetite for healthcare assets.
2. What attracts investors: Recurring demand, consolidation opportunities and the ability to build scalable chains.
3. Capital is not the problem: India needs enormous investment, and the open question is what that investment actually produces.
4. The tests to apply: Whether it creates capacity in under served districts, makes treatment cheaper and strengthens primary care, or instead acquires existing businesses, consolidates markets and pursues the most profitable segments.
5. The standard proposed: The 2026 Lancet Commission Report on a Citizen-Centred Health System for India argues for a stronger publicly financed and publicly provided health system as the foundation of universal healthcare.

Challenges to a publicly financed health system

1. Spending is stuck below the policy’s own target: The share of public money reaching health has not moved to the level the policy set, so every other reform runs into a financing ceiling. Eg. Only around 40 per cent of public health funds go to primary care, against the National Health Policy 2017 target of two thirds.
   The Fix: Ring fence a rising share of the health budget for primary and preventive care, with an annual reporting requirement against the two thirds target.
2. Health is a State subject and capacity varies sharply: Delivery depends on the state, so a single national design lands on very different administrative systems. Eg. Kerala’s decentralised public health system and Tamil Nadu’s doorstep care programme for the elderly and for patients with non communicable diseases have no counterpart in many states.
   The Fix: Tie central health transfers to state level outcome indicators rather than to expenditure alone, so building capacity is what gets rewarded.
3. Public beds sit where the patients are not: Public capacity is concentrated in cities while most of the population is rural, so proximity rather than price decides who reaches care. Eg. 73 per cent of public hospital beds are in urban areas.
   The Fix: Make rural service a condition of subsidised medical education, with the posting tied to the district that lacks that specialty.
4. Money collected for health does not reach health: A cess raised for a stated purpose does not arrive in the fund built for it, so the shortfall persists even where the revenue exists. Eg. The Comptroller and Auditor General has reported a gap of over Rs 43,000 crore in the transfer of health cess to the Pradhan Mantri Swasthya Suraksha Nidhi.
   The Fix: Make the transfer of the health cess to that fund automatic, and report the closing balance in the annual budget documents.
5. Regulation of a commercialised sector is weak: Where private providers deliver most of the care, the state’s only lever over price and quality is a regulatory capacity it has not built. Eg. There is no national mechanism that caps the cost of high cost private procedures.
   The Fix: Enforce the Clinical Establishments (Registration and Regulation) Act, 2010 across states, with published standard treatment guidelines and rate ranges.

Conclusion

The expansion is real and it is being measured against the wrong thing. Counting colleges, seats, cards and institutions records what the state has built, and records nothing about whether a household can reach care it can pay for. The unresolved tension is that the public system is being asked to carry a universal promise on a share of national income that has not risen to meet it, while the private system it defers to sets the price. What to watch is whether that financing share moves, because every other reform in this area sits downstream of it.

Public Healthcare System in India

1. Constitutional placement: Public health and hospitals are a State subject in the Seventh Schedule, with the Centre acting through centrally sponsored schemes and coordination rather than direct delivery.
2. How delivery is organised: Rural care runs in three tiers, the sub centre, the primary health centre and the community health centre, with district hospitals and medical college hospitals above them.
3. Where the disease burden now sits: Non communicable diseases account for around 66 per cent of total deaths, with cardiovascular disease and chronic respiratory disease the leading causes.
4. Scale of the primary care network: More than 1,85,000 Ayushman Arogya Mandirs, formerly health and wellness centres, are operational.

Government Initiatives for Public Healthcare

1. National Health Mission: It is the umbrella programme funding rural and urban public health delivery through the states, and it created the Accredited Social Health Activist (ASHA) cadre in 2005.
2. Pradhan Mantri Swasthya Suraksha Yojana: It addresses regional imbalance in tertiary care by setting up new AIIMS institutions and upgrading existing government medical colleges.
3. Ayushman Bharat Digital Mission: It builds the digital health record layer, with Ayushman Bharat Health Accounts giving each person a portable health identifier.
4. eSanjeevani: The national telemedicine service links primary health facilities to specialists on a hub and spoke model, extending specialist advice to remote and tribal areas.
5. Pradhan Mantri Bhartiya Janaushadhi Pariyojana: Its Janaushadhi Kendras supply quality generic medicines at low prices, reducing the medicines share of household health spending.

Back2Basics

1. What it is: The Committee on Health and Family Welfare is one of the 24 department related standing committees of Parliament.
2. Composition: Each such committee has 31 members, 21 from the Lok Sabha and 10 from the Rajya Sabha, all nominated rather than elected, for a tenure of one year.
3. Origin: The system of 17 such committees was constituted with effect from 8 April 1993, and was restructured in July 2004 to the present 24.
4. Weight of its reports: It examines the ministry’s demands for grants, bills and policy, and its recommendations are advisory rather than binding on the government.

Matching Previous Year Question

“[2024, GS2, 15 marks] In a crucial domain like the public healthcare system, the Indian State should play a vital role to contain the adverse impact of marketisation of the system. Suggest some measures through which the State can enhance the reach of public healthcare at the grassroots level.”